Correlation Between Home Depot and Vision Marine

Can any of the company-specific risk be diversified away by investing in both Home Depot and Vision Marine at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Home Depot and Vision Marine into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Home Depot and Vision Marine Technologies, you can compare the effects of market volatilities on Home Depot and Vision Marine and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Home Depot with a short position of Vision Marine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Vision Marine.

Diversification Opportunities for Home Depot and Vision Marine

-0.77

Correlation Coefficient

Home Depot  Vision Marine

Pay attention - limited upside

The 3 months correlation between Home and Vision is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Vision Marine Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vision Marine Techno and Home Depot is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Home Depot are associated (or correlated) with Vision Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vision Marine Techno has no effect on the direction of Home Depot i.e., Home Depot and Vision Marine go up and down completely randomly.

Pair Corralation between Home Depot and Vision Marine

Allowing for the 90-day total investment horizon Home Depot is expected to generate 0.11 times more return on investment than Vision Marine. However, Home Depot is 9.14 times less risky than Vision Marine. It trades about 0.18 of its potential returns per unit of risk. Vision Marine Technologies is currently generating about -0.24 per unit of risk. If you would invest  37,247  in Home Depot on September 12, 2024 and sell it today you would earn a total of  5,012  from holding Home Depot or generate 13.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Home Depot  vs.  Vision Marine Technologies

Home Depot

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Home Depot are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Home Depot exhibited solid returns over the last few months and may actually be approaching a breakup point.

Vision Marine Techno

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vision Marine Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Home Depot and Vision Marine

The main advantage of trading using opposite Home Depot and Vision Marine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Vision Marine can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Vision Marine will offset losses from the drop in Vision Marine's long position.

The idea behind Home Depot and Vision Marine Technologies pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.